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Vehicle fuels and lubricants had a combined expenditure weight of 5.81 percent in the consumers price index (CPI) at the June 2006 quarter. Petrol is the second-largest class within the CPI, at 5.38 percent, behind the actual rentals for housing class (6.87 percent). The concepts, sources and methods used to compile the petrol class and the other vehicle fuels and lubricants class are explained in this article.

Position in CPI structure

Petrol and other vehicle fuels and lubricants together represent 5.81 percent of the CPI. The petrol class, and the other vehicle fuels and lubricants class, fall within the transport group of the New Zealand Household Expenditure Classification used in the CPI.

Expenditure weights - vehicle fuels and lubricants

Group, subgroup or class

Level

June 2006 quarter expenditure weight%

Transport

Group

17.24

Private transport supplies and services

Subgroup

9.27

Petrol

Class

5.38

Other vehicle fuels and lubricants

Class

0.44

The petrol class includes 91 octane petrol and 95/98 octane petrol, while the other vehicle fuels and lubricants class includes diesel and motor car oil.

Expenditure weight estimation

The 2003/04 Household Economic Survey (HES) was used to derive the current weights for vehicle fuels and lubricants.

The weight for petrol increased from 3.12 percent at the June 2002 quarter to 5.38 percent at the June 2006 quarter. This was due in part to petrol prices being 53 percent higher in the June 2006 quarter than in 2003/04. Similarly, diesel prices were 83 percent higher. Given the significant increase in prices for petrol, deliveries of petrol declined in volume terms by 0.8 percent between 2003/04 and 2005/06, according to the New Zealand Energy Statistics. However, these deliveries were for both household and non-household use. Because reliable information was not available on changes in volumes purchased by households, an adjustment was not made for any decline in petrol volumes purchased by households after 2003/04, and before implementation of the weights at the June 2006 quarter price reference period.

Item and sample selection

The sample of outlets visited for vehicle fuels and lubricants was last reselected during the June 2006 quarter, as part of the 2006 CPI review.

As part of this review, the range of outlets was improved at the regional level, to better cover available brands and types of fuel. The updated sample consists of an appropriate mix of chains as well as company owned/controlled and independent vehicle fuel sites. It also reflects a mix of sites supplying 95 octane petrol and those supplying 98 octane petrol. The approximate mix of 95 octane and 98 octane petrol came from information provided by industry players.

However, as vehicle fuel prices tend to change frequently, these are priced on a weekly basis. In most regions prices are collected on Fridays, while in a few regions prices are collected on Thursdays. Prices for 91 octane petrol, 95/98 octane petrol, and diesel are collected each week from about 130 outlets across the 15 pricing centres.

Estimation

The CPI petrol price index measures price changes of 91 octane petrol and 95/98 octane petrol. Within each CPI region, a geometric mean price per 10 litres of each fuel is calculated from the prices surveyed each week from individual service stations. This assumes that consumers increasingly favour outlets showing lower relative price change. Monthly regional average prices for each fuel are then calculated as the arithmetic mean of the weekly means within each month. Quarterly regional average prices for each fuel are then calculated as the day-weighted arithmetic means of the means for the three months within the quarter. Regional price movements from the base (ie June 2006) quarter to the current quarter are then weighted by the regional population-weighted share of the national expenditure weight, to calculate the national 91 octane petrol, 95/98 octane petrol, and diesel price indexes for the current quarter.

Since petrol and diesel prices are collected either 12 or 13 times each quarter, a price change that happens after the first price collection of a quarter is reflected only partly in that quarter, with the remainder being reflected in the following quarter.

Vehicle fuel discount schemes

Fuel discount schemes related to spending at supermarkets and in-store at petrol stations were first incorporated into the CPI in the December 2006 quarter. Further schemes, related to spending at other types of retail outlets, were added to the CPI in the March 2007 quarter.

Information on the volume and value of discounts attributable to private households is used to adjust surveyed petrol and diesel pump prices. Adjustments are estimated for each of the five broad CPI regions (Auckland, Wellington, rest of North Island, Canterbury, and rest of South Island) for each grade of fuel (91 octane, 95/98 octane, and diesel). These discounts are applied at the quarterly regional average price level for the 15 pricing centres.

Since the implementation of the vehicle discount schemes in the December 2006 quarter, vehicle fuel price movements are calculated by comparing discounted prices for the previous quarter with discounted prices for the current quarter. This means that vehicle fuel changes reflect both change in pump prices and change in the level or uptake of discounts.